Law firms open doors to whistleblowers as manufacturer violations growMUMBAI: The growing number of drug manufacturing-related violations in India and increasing presence of large US companies are prompting whistleblower law firms to scout for their potential clients in India. These firms want whistleblowers to come forward and report any fraud. They offer complete anonymity to such people besides legal services linked to possible compensation.

Whistleblower firms such as Constantine Cannon, and Kohn, Kohn & Colapinto (KKC) Partners are nudging employees of outsourcing companies that do work for US entities or companies with US operations to come forward and report frauds under various provisions such as the False Claims Act (FCA), or under the whistleblowing programmes of Securities Exchange Commission (SEC) or the Internal Revenue Service.

Industry insiders said the interest of whistleblowing firms in India has grown after the Ranbaxy scandal, which saw one of its former employees walk away with $48 million in reward by the US Department of Justice for bringing to their notice the company’s involvement in supplying adulterated drugs to the US Medicaid programme.

“We saw such a rush of law firms reaching India after the Bhopal Gas tragedy, as these firms were looking at ways to sue Union Carbide,” said Darshan Kulkarni, a Philadelphia-based lawyer who specialises in FDA compliance. “At that time, the US courts could not do much as it was out of their jurisdiction,” he explained.

But as globalisation has blurred the boundaries of trade, the potential of cross-border corruption has gone up. “So, firms might not be able to set up physical presence; because of extra judicial issues they might be looking at other ways to reach out,” Kulkarni said.

Under the FCA and SEC whistleblower programme, the US recovered a total of nearly $4.5 billion in 2015 alone. Whistleblower awards under SEC can range from 10% to 30% of the money collected in a case. Besides, under the Foreign Corrupt Practises Act, the False Claims Act and the Dodd-Frank Wall Street Reform Act, the Securities Exchange Commission (SEC) of the US has set up an office of whistleblower. The office, since its launch in 2010, has seen growing tipoffs from three countries outside the US —China, India and Australia.

It is this trend that is tempting firms to offer a more professional service to potential snitch. “At least four awards have been made to whistleblowers who reside outside of the US, including SEC’s largest award-to-date of $30 million,” said Tim McCormack, partner at Constantine Cannon.

McCormack, who specialises in representing whistleblowers in ‘qui tam’ lawsuits under FCA, IRS and SEC programmes, said his firm is actively looking to expand international operations and India is one of the important countries it wants to reach out to.

Because of its highly technical skilled workforce with outsourcing jobs, India is integrated to the US, he said. “In the context of healthcare fraud, a major issue is that people are billing the US government for services that did not happen or they are claiming patients are sick than they are,” said McCormack. “So, someone in the US is giving instructions on to workers in India to do such things, which can be reported as fraud by the employees in India to the US government,” he added.

KKC Partners, which has set up a global whistleblowers website, reaches out to various nationalities, including Indians. This firm has given a detailed rundown in 10 different Indian languages on how to submit an information secretly and under which laws they can reach out to US authorities. Lawyers in India, however, said whistleblowing is still a risky venture for Indian employees.

“The US government needs to provide them with much stronger legal protection from possible legal action by their employers. If not, it’s quite likely that the Indian whistleblower will be prosecuted by his employers in India,” said Prashant Reddy, an independent lawyer in New Delhi. “The threat of such prosecution will have a chilling effect on future whistleblowers,” he said.

Meanwhile, the risk of employees reaching out to whistleblowing firms and legal requirement by the Company’s Act have nudged several Indian companies to set up internal an whistleblowing mechanisms, an effort towards better transparency. “Though this is still an evolving concept, companies are taking this seriously as we are seeing that independent directors are pushing them to set up internal whistleblowing mechanisms,” said Rohit Mahajan who heads Deloitte’s forensic practice.